Republican U.S. presidential candidate Donald Trump steps away after greeting Indiana Governor Mike Pence during the introduction of Pence as his vice presidential running mate in New York City, July 16, 2016. 
Photo by Carlo Allegri/Reuters

Don’t miss the fine print in Trump’s Carrier news

Over the summer, during a campaign rally in Indiana, then-candidate Donald Trump made a specific vow: “We’re not going to lose Carrier air conditioning from Indianapolis.” And with this in mind, the news out of the Hoosier State yesterday seemed very encouraging, at least at first blush.
The incoming Trump administration and United Technologies have reached an agreement that will keep close to 1,000 jobs at Carrier Corp., which is owned by United Technologies, in Indiana.

Carrier had planned to move production from a key factory in that state to Mexico, taking with it the roughly 1,400 jobs of those who work at the Indiana plant.

But shortly after CNBC revealed that Donald Trump was expected to travel to Indiana on Thursday to reveal that a deal had been reached, Carrier itself confirmed the agreement.
Details of the agreement are scarce, and the Indianapolis Star reported overnight that many workers will very likely “still be laid off.”

But for the workers whose jobs appear to have been saved, it’s still unambiguously good news. The president-elect will head to Indiana tomorrow to celebrate the deal, take credit for the negotiations that began earlier this year (long before he even won the Republican nomination), and point to the progress as proof of Trump’s ability to boost American manufacturing.

There is, however, an important catch.

In this case, Trump didn’t use his self-professed expertise in negotiations to reach a compromise with Carrier. Rather, he and the state of Indiana gave Carrier lots of money through state “incentives” and tax breaks in order to convince the company to stay.

That, in and of itself, isn’t especially controversial. Cities, counties, and states do this all the time to keep companies happy before they pick up and go somewhere else. But it’s not the basis for a sustainable, national manufacturing strategy: the Trump administration can’t run around throwing grants and tax breaks at every CEO who’s thinking about moving production jobs out of the country.

Indeed, there’s an Economics 101 problem: if companies are led to believe the government will give them money to stay in the United States, every employer, whether they have outsourcing plans or not, will have a strong incentive to call up the Trump White House and say, “Give us a sweet, taxpayer-financed deal or we’re out of here.”

There is no scenario in which the Republican administration says yes to each of them.

Don’t get me wrong, I’m happy for those Hoosiers who’ll keep their jobs. I also understand the benefits of a political p.r. campaign: Trump will hail himself as a hero for effectively bribing Carrier to only lay off some of its Indianapolis workforce.

But if you’re suddenly optimistic that the hapless president-elect knows what he’s doing when it comes to manufacturing and job creation, it’s probably best to lower expectations.